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As Refineries Button Up, Fuel Supplies Cause Concern: Wholesale Gasoline Prices Spike As Disruption Feared
Friday, September 12, 2008 5:51 AM


(Source: Houston Chronicle)trackingBy Brett Clanton, Houston Chronicle

Sep. 12--Hurricane Ike's pending assault of the Texas Gulf Coast spurred a slew of major oil refineries to shut down Thursday, stoking concerns that the lost output will further strain U.S. fuel supplies and send pump prices higher.

The closures included Exxon Mobil Corp.'s Baytown refinery and BP's Texas City plant, two of the nation's largest fuel-making facilities.

Ike has raised fears of a repeat of Hurricane Gustav, which last week plowed through a key refining corridor in south Louisiana. Some critical energy infrastructure remains out of commission because of damage from that storm.

One analyst estimated Thursday that Ike's current track could lead to short- or long-term disruptions at plants representing roughly 40 percent of U.S. refining capacity.

Such predictions, coupled with already weakened fuel stockpiles after Gustav-related refinery outages, have helped push wholesale gasoline prices sky high in recent days.

On Thursday, fuel station operators woke up to find the spot price for gasoline had risen nearly $1.50 a gallon overnight.

"We didn't see that big a rise in Katrina," said Douglas Haugh, executive vice president of Gainesville, Ga.-based Mansfield Oil Co., one of the nation's largest fuel distributors.

Yet during a major storm, gas stations will be unable to raise pump prices enough to cover increased fuel costs, fearing allegations of price gouging, he said.

Among the list of oil refineries that either suspended production or were in the process of shutting down Thursday include Valero Energy Corp.'s Texas City, Port Arthur and Houston plants, LyondellBasell's Houston plant, Shell's Deer Park complex, ConocoPhillips' Sweeny facility and Marathon Oil Corp.'s Texas City refinery.

Other plants in the region were running at reduced rates, while chemical plants operated by BASF, Dow, DuPont and others were also halting production.

But refineries in Corpus Christi, where Ike was earlier forecast to land, were running normally Thursday.

Fuel supplies were already weakened after Hurricane Gustav knocked out about 15 percent of the nation's refining capacity for several days.

An Energy Information Administration report released this week showed gasoline stocks last week dropped 6.5 million barrels, far more than the 4.7 million barrel drop in gas supplies expected.

Ryan Mossman, vice president and general manager of fuel management at Houston-based FuelQuest, said the effects of the lost output have rippled across the country. That's because a significant amount of the fuel produced in Gulf Coast refineries is destined for other states.




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